Finding that a divorce decree and property settlement requiring a plan participant to name his ex-wife as beneficiary of his employer-provided life insurance did not constitute a qualified domestic relations order (QDRO), a Virginia court held that a life insurance plan administrator properly paid benefits to the participant’s second wife and children as named beneficiaries.
Under the property settlement, the participant agreed to make his ex-wife the beneficiary on all of his personal and group life insurance. Several years after his divorce, however, the participant changed the beneficiary designation on his life insurance, naming his second wife and his children the primary beneficiaries. On the participant’s death in 2008, the insurance company paid the benefit to his widow and children. After the proceeds had been paid, the participant’s first wife claimed the benefit, presenting the divorce decree and property settlement requiring the participant to maintain her as primary beneficiary. The insurance company filed suit, seeking a judgment as to the proper beneficiaries of the policy.
Because the insurance company did not take a position on the beneficiary issue, the participant’s son asked the court to rule that the benefits had been properly paid. The court held that, absent a valid QDRO, the plan administrator must look solely at the plan document to determine the beneficiary of the benefits. Since the divorce decree and property settlement failed to specify the name of the plan and the amount of the benefit payable to the first wife, the court held it did not qualify as a QDRO. As a result, the benefits were properly paid to the widow and children as the designated beneficiaries.
In an interesting turn, the court imposed attorney’s fees on the insurance company that brought suit because it refused to take a position in the complaint. The court noted that it was the insurance company that initiated the action, thereby compelling the son to seek counsel and incur legal fees. In the words of the court, had the insurance company “simply taken the position that it had distributed the benefits legally—a position that is clearly mandated by the facts and law of this case,” the son would have had to spend little if any money defending the case. Instead, an unnecessary burden was placed on the widow and children to defend their receipt of benefits. Calling the insurance company’s conduct “irresponsible” and bordering “on bad faith,” the court awarded reasonable attorney’s fees to the son who successfully defended the payments. (Metropolitan Life Insurance Co. v. Leich-Brannen, E.D. Va. 2011)